James O'Connor (Cork East, Fianna Fail)
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179. To ask the Minister for Finance the timeline for the review of research and development tax credits; when it will commence; the steps along the review; his views on whether it is a key instrument in Ireland's competitiveness in an challenging global business environment with many competitors to Ireland on incentives including the UAE; and if he will make a statement on the matter. [7044/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Research and Development (R&D) corporation tax credit allows companies to claim a 30% tax credit in respect of expenditure incurred on qualifying R&D activities. The Research and Development (R&D) corporation tax credit is an important feature of the Irish Corporation Tax (CT) system. The primary policy objective is to increase business R&D in Ireland, as R&D can contribute to higher innovation and productivity. More broadly, the R&D corporation tax credit forms part of a suite of corporation tax measures that ensures Ireland remains an attractive location for both domestic and inward investment. The tax credit forms part of Ireland’s corporation tax offering aimed at attracting FDI and building an innovation-driven domestic enterprise sector.

As with all tax expenditures, the Research and Development corporation tax credit is regularly evaluated to assess its continuing relevance, cost, impact and efficiency. In line with my Department’s Tax Expenditure Guidelines, and as announced in Budget 2025, an evaluation of the R&D tax credit will take place this year. This is also in line with the commitment within the Programme for Government ‘Securing Ireland’s Future’, to examine options to enhance the Research and Development corporation tax credit, reward innovation and digitalisation and ensure Ireland has the global best in class incentive to encourage innovation by domestic and international companies. As part of the review it is intended that a public consultation will be conducted.

The R&D tax credit has grown and evolved since its first introduction in 2004, in response to business and stakeholder feedback. It is important that the R&D regime continues to evolve in light of international tax changes, ensuring that Ireland’s R&D supports remain competitive in a globalised world. Recent Finance Acts have enhanced the regime, to the benefit of all qualifying claimant companies. For example:

• Finance Act 2022 introduced changes to the manner in which the R&D tax credit is claimed to ensure compatibility with Pillar Two rules. It also provided for an amount of the credit, initially up to a maximum of €25,000, to be payable in full in year one instead of being spread over 3 annual payments. The first year payment threshold was increased to €50,000 in Finance (No.2) Act 2023 and further increased to €75,000 in Finance Act 2024. These increases can provide a cash-flow benefit and are aimed at encouraging more companies to engage with the R&D corporation tax credit regime.
• Finance (No.2) Act 2023, also increased the rate of the credit from 25% to 30%, providing an increase in support to all claimant companies, thus encouraging increased engagement with the regime.